Fiat says new Brazil factory benefits from public financing

Reuters Staff

2 Min Read

MILAN, Sept 21 (Reuters) - Italian automaker Fiat is spending 2.3 billion euros on a new factory in Brazil and will receive public financing and tax breaks, something not allowed in Europe, Chief Executive Sergio Marchionne said in a statement on Friday.

"The last time this sort of transaction took place (involving public financing) involving Fiat in Italy was at the start of the 1990s in Melfi," the statement said, pointing out that such financing is not allowed under EU rules.

The chief executive has come under pressure to provide details of Fiat's Italian strategy as the economic recession heightens concerns over job losses at the country's biggest private employer.

Fiat's decision to delay investment spending on new mass-market models for Italy has caused a storm of criticism at home. Italy's weak economy has fueled concern that the carmaker's lack of investment could be a sign it is shifting its focus to growing markets like Brazil and the United States, where it controls Chrysler.

Fiat has delayed the launch of its new Punto car, which is made in Italy, until 2015, for example.

Construction started on the new factory in Brazil, Fiat's second, on Sept. 18. Fiat will receive financing for up to 85 percent of the full amount, it said on Friday, and also will receive tax benefits for five years after it starts production of new cars there. (Reporting by Jennifer Clark; Editing by Hugh Lawson)